Hurriyet Daily News, Turkey
Oct 23 2009

Nabucco falls behind rival Russian gas projects

Friday, October 23, 2009
DÃ-NDÃ` SARIIÅ?IK
ANKARA – Hürriyet Daily News

The energy row between Azerbaijan and Turkey has consequently become
apparent as the two allies are experiencing a rough patch in
relations. The once promising Nabucco project has fallen behind in
importance for transporting Caspian energy to Europe as Russia pulls
ahead with concrete steps on the South Stream pipeline, experts say
The Nabucco project, which has been designed to provide Caspian energy
to Europe via the shortest route and lowest price possible, has now
fallen behind alternative Russian energy projects in terms of
feasibility, experts said.

In the hopes of lessening the dependency on Russian gas, both the
European Union and the United States have actively supported the
Nabucco project. The signature ceremony held by various governments in
Ankara was defined as `a breakthrough’ by the high-ranking officials
from 15 countries who attended the event in July. However, no deal yet
has been signed with potential suppliers so far.

Russian Prime Minister Vladimir Putin did not even wait a month before
signing a series of cooperation agreements on major energy projects
with his Turkish counterpart Recep Tayyip ErdoÄ?an in August.

`Turkey unfortunately made the biggest mistake in supporting the
[Russian proposed] South Stream pipeline in return for [Russia
agreeing to use the proposed] Samsun-Ceyhan route,’ Sinan OÄ?an,
chairman of the International Relations and Strategic Analysis Center,
or TÃ`RKSAM, told the Hürriyet Daily News & Economic Review on Friday.

Moscow wants to bypass Ukraine in its gas deals; though the country is
a major gas transit route to Europe, it has been a headache to Russia
in the past. ErdoÄ?an allowed Putin to conduct feasibility studies in
Turkish territory regarding a shift in the South Stream’s route.
Putin, in response, agreed to pump its crude oil into the proposed
Samsun-Ceyhan pipeline as an alternative to the congested Bosphorus
Strait.

`Turkey only considers commercial profits and has to change its policy
in line with evolving conditions. Russia, however, follows a more
strategic and geopolitical policy and gets closer to its final goal
step-by-step,’ OÄ?an said.

Russia also signed agreements on the Serbian leg of the South Stream
gas pipeline and an underground gas storage facility on Tuesday.

`As Putin already noted, it seems that the South Stream pipeline will
be realized sooner than we expected,’ OÄ?an said.

President Abdullah Gül and his Russian counterpart Dimitry Medvedev
discussed the South Stream’s Turkish route in a recent phone
conversation, OÄ?an said. Meanwhile, BOTAÅ?, the state-owned Turkish
crude oil and natural gas pipeline and trading company, attempted to
delay such approval due to its partnership in the rival Nabucco
project, OÄ?an said.

He said Turkey has hampered its own project. `The conditions are
changing against Nabucco in favor of South Stream because of Turkey’s
commercial approach,’ OÄ?an said.

`One needs to consider such major projects in line with geo-strategic
policies. Otherwise, even small changes may turn the tables, like is
currently happening,’ he said.

Turkey has not yet permitted any construction on its territory except
for feasibility studies, OÄ?an said. `I don’t know what is discussed
behind closed doors. As far as we’ve heard, only feasibility studies
and research has been allowed,’ he said. `But I can’t see a reason why
the project won’t go the next step.’

One of the consequences of the recent rift between Turkey and
Azerbaijan is likely to occur in the energy field, OÄ?an said. `No gas
project can be realized without Azerbaijan. The Nabucco project is on
the agenda but we are seeing the worst days in the history of our
relations with Azerbaijan,’ he said.

`Reconciliation with Armenia will be meaningless unless a settlement
between Baku and Yerevan takes place. How can you put Armenia on the
route of Nabucco if it doesn’t find peace with the supplier country?’

Russia’s Gazprom signed a natural gas purchase deal in Baku on Oct. 10
on the same day Turkey and Armenia signed two reconciliation
protocols.

`Russia is in a hurry to realize its projects bypassing Ukraine
regardless of their higher costs,’ Ä°lham Shaban, a Baku-based energy
expert, told the Daily News in a phone interview Friday.

ErdoÄ?an joined his Italian and Russian counterparts via a video
conference call Thursday. The three discussed joint energy projects
after Turkey’s Ã?alık Energy and Italy’s ENI agreed to jointly build
the Samsun-Ceyhan pipeline, which will carry crude Russian oil from
the Black Sea to the Mediterranean.

`The South Stream is the most feasible and promising project among the
existing alternatives as Russia has concrete buyers and enough gas
supplies,’ Shaban said.

`Nabucco has fallen one to two steps behind Russian projects because
the project owners ` Turkey, Romania, Bulgaria, Hungary and Austria `
are mainly transit countries and potential major buyers are in favor
of Russian supplies,’ he said.

`Germany has turned its face to the North Stream while Italy clearly
backs the South Stream. Austria has agreements to buy Russian gas till
2035. Even Turkey is opting to buy Russian gas at a cost of $265-280
per 1,000 cubic meters although Azerbaijan is providing it at $120.’

The existing long-term deals to purchase gas from Russia are the
biggest obstacles, he said. `Nabucco is the most optimal and shortest
route to carry gas from the Caspian to Europe. But it is too early. I
think it is a project for 15 to 20 years later.’